Darci Vetter
A conversation with?
Ambassador Darci Vetter, who served as the chief agriculture negotiator for the office of the U.S. Trade Representative in the Obama Administration
OCJ: Agriculture is really dependent on trade, even more-so than we often realize. What are some of the key things we need to understand?
Darci: U.S. agriculture is very heavily dependent on trade, not only because we produce more than we consume, so we have to find customers elsewhere, but also because we use those markets to add value to our products. We send things that might not be valuable here. Some of our variety meats or our lower quality cuts we can send abroad and have them be profit centers instead of something that costs more money for us to dispose of or find a use for in the U.S. We use foreign markets to create and find the best opportunity to sell all the different things we are good at producing, whether that?s plant or animal product. We have gotten pretty good at doing it and one of the reasons we are so good at it and that we have these strong trade agreements with other countries.
OCJ: As you just pointed out, it isn?t always necessarily government against government all the time in these trade negotiations, when you get down to it it really is about a farmer producing for a consumer and we need to reemphasize that on what is going on at the governmental levels, right?
Darci: That is absolutely right, we have very strong relationships with our customers in Mexico and vice versa here and that?s been built over time. We?ve had NAFTA in place for more than 20 years along with that framework of trade between us. They can be challenged but hopefully not broken overnight. I think those are things we want to remember and to keep intact and to tell our stories on both sides of the border about the importance of the agriculture economy for both of us.
OCJ: Another trade issue that?s been at the top of mind is the Trans Pacific Partnership that you worked on, but that the Trump Administration quickly pulled out of at least partly due to concerns that it was multi-lateral. President Trump seems to favor more bi-lateral agreements. What are your thoughts on that strategy moving forward?
Darci: I think there was some concern of that because it was a negotiation among 12 parties that somehow to get all 12 to reach agreement you would have to go with the lowest common denominator. There was concern that the TPP might not reach the highest standard or create as complete a market opening as you would otherwise and mostly we heard examples of that on the manufacturing side. I am not really sure that was the dynamic that had a play in agriculture or even a play across the board because I think it can be true that you choose a group of countries who all have a commitment to a very ambitious agreement and you use them to push each other and to add value for the agreement. So in agriculture, if you just look at the countries that are there, you have two different types of opportunities. You had expanded access into Canada and Japan which are high income, high value markets and pretty mature markets, but also two countries that in their past agreements had refused to put agricultural products on the table. That changed. We said to be part of this group and get access to 12 other countries at once, you have to be all in. Every country has to open every product and so for the first time, we got expanded access to Canada?s poultry and ag market, something we didn?t get in NAFTA. And Japan, who in the past when negotiating free-trade agreements with countries said, ?We have these six sacred products and we just don?t touch them.? Japan would never talk about rice, dairy, sugar, pork and beef ? all of them were on the table in TPP and we got access to all of them. Japan and Canada were willing to do that because they not only got access to new markets, but they also got access to these real powerhouses of growth. The TPP included Vietnam and Malaysia, countries in southeast Asia who have this rapidly growing middle class who are able to buy all sorts of other products, ag and non ag, and for the U.S, as incomes rises in those countries, they start buying more of things we already send them such as feed grain, skim milk powder and basic products. Then they start demanding all of these value added products. Our meat, our poultry, our dairy, more fresh fruits and vegetables as they improve their nutrition.
Through TPP we had the opportunity to get in on the ground floor when they were just starting to buy those products and form those consumer relationships that are so important that they would look to the U.S. to get those products. Without TPP in place, we face a real competitive disadvantage into those markets because they already have the ASEAN free trade agreement that will give them zero tariffs on products like dairy and wine where we excel instead coming from New Zealand and Australia. Japan and Australia have already signed a bi-lateral free trade agreement. The tariffs on beef from Australia are now more than 10% with percentage points lower that what the Japanese pay on beef coming from the U.S. Our cattleman say it?s costing them $400,000 in lost sales a day to the Japanese market, our top market for beef, so it is important that whatever approach we use, bi-lateral or multi-lateral agreement that we can get back into the game and we have a strategy. That?s so important for us.
OCJ: You clearly spent quite a bit of time working on the TPP and to see it pitched out the window, that has to be somewhat frustrating.
Darci: It?s hugely disappointing, because it was a very complex negotiation because you had to get 12 countries all rowing in the same direction but also because this agreement had almost unanimous support from the agriculture sector. It is disappointing to hear rhetoric about trade that I think undervalues the good it can generate throughout the ag supply chain and how much it does for rural economies. Part of the reason I love working in ag trade is because both agriculture and trade policy have traditionally been bipartisan and so you get to form all sorts of coalitions that might not be possible in other places, and we really saw that in assistance I got from industry and Congress and elsewhere in negotiating the TPP.
I believe that the TPP model isn?t going away and one of the things we really tried to do in TPP was try to make it a more transparent negotiating process, and so the text of that entire agreement ? every tariff in its schedule for being reduced to zero, every rule that was written in that agreement ? has been publicly available since 2015 so people saw what we achieved. While it may not go into force with precisely those countries on the timeline that we thought, I think it will influence how countries negotiate with each other. In fact, in this renegotiation of the NAFTA, we Wilbur Ross, U.S Secretary of Commerce, saying we should look really hard at the TPP text for how we might modernize NAFTA, how we might bring in labor and environment provisions into the agreement, how we might update our intellectual property standards, how we think about disciplining state-owned enterprises and things like that to modernize an agreement that is now 23 years old. It will have ripple effects somewhere, somehow so I don?t think it is going away, but obviously I would have loved to see it be ratified right away.
OCJ: Clearly there are some negotiating strategies that have been promoted by the Trump Administration that will apply to trade moving forward, what are your thoughts on some of the pros and cons of the new strategies we are seeing?
Darci: I think you have to keep in mind with trade negotiations and when you are negotiating with people that you want to make your core partners, these are people you are going to have to deal with every day. Negotiating is step one and then there is implementation and countries have to make real changes to implement these agreements to their tariff schedules, to their regulations. This is a long term relationship. I think sometimes folks point to Donald Trump?s book, ?The art of the deal,? where you start with the really hard core position, throw them off their balance and you wind up closer to the goal you wanted and you don?t have to go so far to the middle. I think that?s great, if you are buying a building or a car and the deal is over once the deal has been made. The whole point of a trade agreement is to bring our economies closer together and to spend more time ?hanging out? once its over. Really engaging and understanding involves not just what the other side is asking for, but why they are asking for it and where they want to see that relationship be in the years ahead. That is pretty critical to getting a good trade deal that allows all the sectors of our economy to participate.
OCJ: Why is it so important for Ohio?s farm community to share their stories with regard to these trade issues?
Darci: I think sharing that story is vastly more powerful coming from the mouths of farmers and ranchers from Ohio than it is from me. Farmers and ranchers can talk about the decisions that they make and the options that they have to provide for their families, to sell their products, to add value to what they do in a way that I just cannot.
